Question

Wine and Roses, Inc. offers a bond with a coupon rate of 8% and a yield to maturity of 10 percent. The coupon is paid semi-annually to the investors and the bonds mature in 5 years. What is the market price of the bond? $922.78 OA. B. $769.22 OC. $807.89 D. $893.27

Answer 1

Solution>

The price of the bond is $922.78 ie. Option (A)

I have solved this question in Excel. The formula used are written along with the values. If you still have any doubt, kindly ask in the comment section.

The formula for calculating the bond price is:

c(--(1+)*) + M(1 + i)-N

B с А 1 Face Value 2 Coupon Rate 3 Coupon Payment 4 YTM 5 No of Periods 6 7 Bond Price 1000 0.08 40 =B2*B1/2 0.05 = 10%/2 10 =5*2 922.78 =B3*((1-(1+B4)^(-35))/(B4))+B1*((1+B4)^(-35)) 00

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